Ray Hansell is the cofounder of
RMH Teleservices, a company that has been ranked on Customer Inter@ction
Solutions'' Top 50 Teleservices Agencies ranking for over 20 years. In
the early 1980s, RMH launched its business by offering consulting services
to in-house telesales operations. They then complemented this business by
forming a small teleservices outsourcing agency, which opened in 1984.

From its inception as a regional teleservices resource, RMH grew to
employ more than 10,000 employees and has, as of late, been posting annual
revenue figures exceeding $200 million. RMH went public in 1996, and Ray
and his partner Marysue Lucci gradually transitioned out of their roles as
CEO and COO. For their contributions to the industry, Ray and Marysue were
awarded the Pioneer Award at a recent American Teleservices Association
(ATA) national meeting.

Last year, we met with both Ray and Marysue at our office in Norwalk,
Connecticut, and we reviewed the progress of their latest venture, MaraStar Communications, a software
firm that develops and distributes patent-pending animations for business
training and communication.

The following represents an extract from a recent conversation I had
with Ray regarding his thoughts on the industry's past, present and
future and his perspective as a past provider, and now a client, of
teleservices agencies.

RT: How do you view the evolution of call center outsourcing?

RH: Perhaps the best way for me to answer is to trace our entrance
and exit into and out of the industry relative to the typical product
lifecycle of any industry.
When we entered the industry in the mid-1980s, the service agency industry
was beyond its infancy ' it was at the 'adolescent' stage of the
product lifecycle. In many ways, the industry behaved just like a
teenager, growing in leaps and bounds.

In the beginning, we had to educate our prospects about the value of
outsourcing their telemarketing, but over time, this shifted to
differentiating RMH from other telemarketing competitors since outsourcing
telemarketing was by then a more accepted practice and the marketplace was
more crowded.

By the end of the 1990s, the industry was fully mature and possessed
all the characteristics of an industry in its mature stage: tighter
margins and consolidation, which led to fewer large competitors.

Unfortunately, a lot of talented pioneers have departed from the
industry, leaving their mark behind; however, I do believe that as the
industry continues to evolve, call center outsourcing will continue to
grow in more integrated ways into mainstream corporate marketing.

RT: How has the perception of the outsourcing industry changed?

RH: Over the past few decades, outsourcing has become a more
acceptable business practice to corporations. Many U.S. companies had been
outsourcing vital business functions such as payroll for years.
Eventually, by the mid 1980s, it began to make sense to outsource direct
marketing functions (such as telemarketing) that employ a lot of workers.

During this time, jobs were shifted from inside a single company to
different locations within the U.S. Barriers such as culture, language and
technology made serious consideration of outsourcing offshore less viable.

Over the past decade, most of these barriers have disappeared. Jobs are
now shifted from the U.S. to India, Pakistan, Ireland and Jamaica, to
mention just a few, and many pundits say, 'They ain't coming back.'

Perception of outsourcing, formerly viewed as a relatively harmless
shift in jobs within the U.S., is now being viewed in a far different
light by the general public as well as by representatives within the U.S.
government.

RT: How has the political environment changed?

RH: In the early 1990s I was involved in grass roots efforts with
Congressional representatives to demonstrate the extensive quality
controls that agencies like RMH utilized to deal with consumer complaints
and to illustrate the jobs created by teleservices throughout the various
Congressional districts. In this way, I was able to put their concerns
into perspective.

Back then, it seemed that much of the noise was being made by a few
outspoken representatives, but the vast majority of Congressional
representatives were not presenting formidable obstacles.

Over the past decade, the volume of calls and subsequently the volume
of consumer complaints has risen dramatically and created what appears to
be bipartisan support for the legislation that we have in place today.

Even our pop culture establishments, such as nationally recognized
television shows such as 'Seinfeld' and 'The Sopranos' have used
telemarketing as a 'whipping boy' to vent consumer anger over
unwelcome phone calls at home.

RT: What about offshoring? What has that done to the industry?

RH: Since many jobs have been outsourced to foreign countries, the
standard 'rebuttal,' that the telemarketing industry is responsible
for growth in the U.S. job market, is no longer valid. In effect,
offshoring has eliminated one of the strongest arguments we had to
mitigate consumer complaints.

In addition, due to the current protracted economic period of
uncertainty following the recession, a lot of emphasis has been placed on
laying blame. In effect, the thought process is, 'Let's find out who
is responsible for all the lost jobs and punish them.'

Companies are being vilified for their offshoring strategies, which
adds yet another black eye to outsourced teleservices agencies because
they are being held responsible not only for consumer complaints, but are
also depicted as the bad guys who are sending jobs overseas.

RT: In the past, you provided teleservices to companies; you now
use the services of outsourcing agencies. What has been your experience on
that side of the fence?

RH: On the one hand, we can certainly relate more to the challenges
that agencies experience with clients, and I believe that we know what
constitutes reasonable expectations, having dealt with similar client
demands ourselves.
On the other hand, we also demand the same level of service and
accountability as clients that we were expected to provide to our clients,
and we're not happy if we don't receive that.

We are also seeing much lower rates for business-to-business
teleservices than when we left the agency business in 1998. It seems that
as margins have shrunk on the business-to-consumer side, competition
broadened so that margins eventually eroded, leading to lower prices for
all related teleservices.

Aside from these observations, it is interesting to see that even in
the business-to-business world where we operate today, the business
contacts we make become just as impatient as consumers do when the call is
unwelcome, poorly purposed or inappropriate for them.

RT: You have been both a public and private company. How have the
challenges and opportunities changed?

RH: Taking our company public in 1996 was both an exhilarating
and exasperating experience. Overcoming the challenges posed during due
diligence and arriving at a successful conclusion with the ticker RMHT
being traded on NASDAQ was certainly an accomplishment, especially when
you consider the limited number of agencies that succeeded in doing so.

However, as founders, sharing control of the company created challenges
that were more difficult than we anticipated. The entrepreneurial instinct
to seize the day and act in a decisive, timely manner is severely
restricted when the control is shifted to committees and boards.

In addition to challenges of control, being a public company adds the
necessity of having to please investors as well as customers. Balancing
'Wall Street' expectations for quarterly results with the
ever-increasing demands of 'Main Street' customers is a very stressful
game, particularly when you consider that over the past eight years, the
majority of public companies in this sector have not played well.

In retrospect, I believe a public offering is a great way for founders
to exit the company, but not as good a vehicle if the founders want to
remain with the organization, unless they can manage to maintain a control
position in the process.

RT: What about timing? Did you leave at the right time?

RH: Many folks in the industry have told me that our timing was
just about perfect and I agree with that assessment.

Although the industry was still growing in 1998 when we left, most
participants will agree that by the end of the 1990s, much of the growth
in volume was largely at the expense of sharply eroding margins. The
window of opportunity for an IPO was closed by then, and the agencies that
were public were under unrealistic pressure to grow revenue and
profitability while still remaining competitive.
In addition, public perception of the industry had shifted dramatically;
while the nature of consumer complaints remains the same, the sheer volume
related to increased calls is far greater.

I think that the 'golden era' of the teleservices outsourcing
industry was during the 1990s, and that we are now on the other side of
that era. Given the mature state of the industry, I believe the timing of
our departure was appropriate.

RT: What prompted you to reenter the entrepreneurial world?

RH: I guess my partner Marysue and I are what you might call
'serial entrepreneurs.' Having spent over 15 years in the industry, we
both retired for about 15 days'tops!

The desire to create and build is just too strong, especially if
you've done it before and have been successful as an entrepreneur.

Initially, we were looking to invest in private ventures as 'Angel
Investors,' though perhaps with a more operational role. One of the
ventures we investigated involved the use of Macromedia's software
'Flash and Director' in a multimedia service company that developed
custom animations for businesses.

We immediately saw a unique application for these software programs and
envisioned them more as a way of creating an attention-getting training
and communications library of humorous animations targeted at call
centers, human resources and sales managers. We thought they could be very
useful to call center and customer service trainers to e-mail humorous
30-second animated messages to call center staff or to use in a training
session.

We created samples of these and showed them to corporate decision
makers via extensive focus groups, which enabled us to gauge the market
interest as well as develop the appropriate pricing and packaging options
that we used to build the products we distribute today.

RT: What products do you offer at MaraStar?

RH: Basically, MaraStar creates short (30 second) animations that
are used in either corporate training or corporate communications. The
training animations, called 'Toon Ups,' are used in classrooms via
PowerPoint or are delivered via the Internet to the desktops of employees
as a way to tune up soft skills and reinforce appropriate behaviors.
Corporate trainers use them to fill in their PowerPoint presentations and
can also print them onto posters to be displayed. They can also post the
actual file to their company's Intranet for employees to view.

These managers like the fact that the messages deal with important call
issues that need to be addressed. The call center representatives liked
them because they are short, humorous and to the point ' a way to give
directions without criticism and also provide a little chuckle. This
proved to be our unique selling proposition.

Companies as diverse as ADP, MCI, Ford Motor and Florida Power &
Light are using these animations to support their call centers and
customer service training initiatives, and through the use of humor, deal
with behavioral and operational problems more effectively.

The second major use of our animations is for corporate communications
to both customers and prospects. These animations are sent out to say
'thank you' to customers, to open doors for salespeople to prospective
accounts or to send a reminder to customers/prospects in a positive and
humorous way. All of these are customizable, so companies can personalize
them to their specific situation
Sales and service personnel throughout the country are using these
animations to elegantly and tastefully differentiate themselves by
enhancing the way they communicate the common messages they frequently
send to their customers. These messages are Web-based and require no
software to install and no file attachments to download.

Thus far, feedback from our customers on both of our major product
libraries has been very positive.

RT: Can you compare and contrast selling a product like yours to
selling a service like you did at RMH Teleservices?

RH: Selling telemarketing services as an outsourcing agency in the
1980s and 1990s during the 'boom-boom' growth period had the upside of
rapid volume; however, the downside was always that we technically did not
control our destiny since we did not 'own' the products or the
markets. Our customers did. During our time in the agency business, we
would frequently ponder, 'What if we could market our own products to
whatever markets we want, whenever we want?'

We now own the products and related patents as well as the customer
base, and we are responsible for these factors. Of course, this places the
burden and risk of developing the marketplace squarely on our shoulders.
This is both the challenge and the opportunity.

In addition to these challenges, the products we now sell are in the
infancy of their lifecycle, especially given their unique qualities. This
situation requires a more patient educational sales process that is
focused on the innovators that typically buy at this early stage. The
mainstream population of buyers usually appears later in the lifecycle,
and much more time is required, along with a lot of seed planting and
cultivating, to reach the harvest ahead.

Currently, we are exploring ways to partner with companies whose
product/markets complement ours, but whose lifecycle is further along,
enabling MaraStar to accelerate its growth. Examples of these include, but
are not limited to, customer relationship management, workforce management
and corporate training and development organizations.

Though we entered this venture at an earlier timeframe than the last,
we remain optimistic that as the market matures, our 'first mover'
advantage will eventually provide rich rewards for MaraStar as well as our
partners.

RT: Where do you see the industry heading?

RH: I think the industry is heading into a different landscape. In
the past, agencies were known for their emphasis on inbound, outbound or
some other specialization. Going forward, I believe we will see more
integrated functionality ' agencies will need to offer a host of
services that will seamlessly enhance these various integrations.

Smaller, 'boutique' agencies under a million or so in revenue and
with narrow specialties, as well as regional or industry focus, will
probably always remain a viable force.

Larger service agencies will need to continually make significant
investments in technology to better enable themselves to offer clients a
wider variety of integrated direct marketing services that are most
suitable for outsourcing.

The mid-sized agencies with 10 to100 million in revenue have the most
difficult challenge: to be able to compete on price with the features
offered by the larger agencies but without the access to capital they need
to create those features.
Additionally, all practitioners face the ongoing challenge posed by
consumer complaints and further complicated by calls coming to them from
foreign countries. Never before have the nature of the call, the source
and affinity of the caller and the quality of the contact being made been
more important to the continued growth and vitality of the industry.

In the future, I believe we will see more consolidation, leaving fewer
agencies. However, I also believe that as outbound
non-affinity/cold-calling programs dry up, consumer confidence will be
restored and the future will be bright for quality providers and
practitioners in the industry.